Nonprofit policy updates from across the nation

From the National Council of Nonprofit Associations

Traditional tax-exempt status of nonprofits challenged in Minnesota – In Under the Rainbow Child Care Center v. Goodhue County, the Minnesota Supreme Court held that “(a)n organization that does not provide goods or services free or at considerably reduced rates as a substantial, not just an incidental, part of its operations is not exempt from payment of real property taxes as an institution of purely public charity” under the state Constitution.

Jon Pratt, Executive Director, Minnesota Council of Nonprofits (MCN) writes: “Unless a more balanced definition of 'organizations of purely public charity' is restored by the state legislature, hundreds of nonprofits across the state will be subject to revocation of their property or sales tax exemptions. ... (These) organizations provide essential services, from child care to group homes to a wide array of activities that have made Minnesota’s quality of life and opportunity what it is.”

MCN will introduce legislation in February to re-instate the property tax exemption tests established by decades of prior case law. Audrey Alvarado, executive director of the National Council of Nonprofit Associations notes in her recent blog posting that this issue is likely to be one of the most important issues facing the nonprofit sector in 2008.

Quick federal budget recap

• On Jan. 30, the Senate Finance Committee laid out a more aggressive Economic Stimulus Package (HR 5140) than the House passed the day before by including more payments to individuals in the form of extended unemployment benefits, payments to low-income seniors, and larger rebates for low-income individuals, while including higher caps on income eligibility for the rebates than those passed by the House. It also resurrects alternative energy incentives. A vote may come today in the Senate, but the bill faces hurdles with House leaders of both parties and the President who favor the slimmer House bill.
• The House failed last week to override President Bush’s second veto of SCHIP, the children’s health insurance bill, again defeating Democrats’ plans to expand government-sponsored health coverage to include an additional four million low-income children. SCHIP has been extended through March 31 at prior coverage levels. House Democrats have vowed to try again.
• The threat of a White House veto hangs over the House and Senate versions of the Farm Bill, a $286 billion reauthorization (HR 2419). Besides the administration’s objections to the cost of subsidies, new spending in the bill for disaster relief for farmers, land conservation and nutrition programs, and a variety of energy-related tax breaks ensures that this bill will be extremely politically difficult in conference committee.
• The Alternative Minimum Tax bill passed without the expiring IRA charitable rollover provision being extended. There will continue to be pressure on Congress from the nonprofit sector to take up legislation in early 2008 to extend expired tax provisions, possibly retroactive to Jan. 1.

Intelligent Mail BarCode proposed rules for 2009 – The Postal Service published a proposed rulemaking in the Federal Register this month that will require mailers to use the Intelligent Mail BarCode (IMB) beginning January 2009 in order to receive automation discounts. This notice “provides advance information to help mailers understand the mail preparation requirements when using Intelligent Mail barcodes and offers insights into the additional information that will be available to mailers that comply with these requirements.” Two different IMB options are proposed in the rulemaking: Full Service, which requires mailers to apply unique IMBs to mailpieces, trays, sacks, and pallets and submit electronic mailing documentation; and Basic, which requires mailers to apply IMBs to mailpieces only. Written comments on this proposed rule will be accepted by the Postal Service until Feb. 21.

Federal electioneering rule issued and challenged – On Dec. 26, 2007, the Federal Election Commission released its final rule on electioneering communications effective immediately. Besides addressing the definition of permissible electioneering communications and the safe harbor (in good detail with clear analysis of specific permissible and impermissible examples), the rule clarifies the situation where an electioneering communication was paid for by general operating expenses of a nonprofit and not from segregated funds contributed for this reason. For permissible communications, and in the absence of a segregated fund for this purpose, only donors who made donations aggregating $1000 or more “for the purpose of furthering electioneering communications” need to be disclosed.

Last week, a federal three-judge panel ruled against Citizens United in its suit against the FEC, in which Citizens United claimed its ads should not be subject to the donor disclosure requirements under the new rule. The organization seeks to run TV ads for its film, “Hillary: The Movie," which criticizes her record, comparing her to a “European socialist." According to OMB Watch, the panel’s decision that this is an electioneering communication requiring donor disclosure has been appealed with a request for the Supreme Court to expedite its decision.

IRS updates

• In late December, the IRS released the revised Form 990. The document released retains the format of a core form and a series of schedules. It provides more opportunities for the organization to explain its activities and makes major changes to the summary page, governance section and schedules. These requirements will be used for the 2008 tax year – the returns filed in 2009. Related instructions will be released early in 2008.  There will be a graduated transition period for smaller organizations with gross receipts under $1 million or total assets under $2.5 million, scaling down over 3 years to a threshold of $200,000 in receipts and $500,000 in total assets. For further information on the redesign effort and the new forms, visit the IRS website.
• SAVE THE DATE! On March 6 NCNA will begin a series of informational webinars for nonprofits on the impacts and implementation of the new Form 990. The first session will feature Julie Floch, CPA, who will address the recordkeeping and accounting impacts to anticipate.

State nonprofit policy updates

Special note on state budgets – “For  the upcoming fiscal year, which begins in most states July 1, at least 19 states are expecting budget shortfalls,” reports the Center on Budget Policy and Priorities. With recession conditions growing, read why two highly regarded economists, Nobel Prize winner Joseph Stiglitz of Columbia University, and Peter Orzag, now the director of the Congressional Budget Office, say spending cuts could actually be more harmful for a state’s economy during an economic downturn than tax increases.

In January, state legislators introduced dozens of bills that impact all nonprofits in their respective states. Below is a partial list of these bills, listed alphabetically by state. Unless otherwise noted, the bills below have not become law.

Uniform law developments: Alabama, Colorado, Georgia, Kansas and South Carolina – The Uniform Prudent Management of Investment Funds Act (UPMIFA) is a revision of 30-year old Uniform Management of Investment Funds Act (UMIFA) which is on the books in 47 states. UPMIFA is already adopted in 14 states with bills being introduced in other states this year, including already Alabama (HB 8), Colorado (HB 1173),Georgia (HB 972), Kansas (SB 433), South Carolina (SB1007).

UPMIFA provides guidance on prudent investing by providing more detail to nonprofits about investment of their funds; sets rules for the spending of endowments, moving away from a “historic” dollar value limitation into a “prudent” spending rule based on donor intent and permanent duration of the endowment; and modifies restrictions on gifts made to nonprofits when amounts are small and older than 20 years. For additional information, visit the UPMIFA website where the text of the law, discussion of comments, and legislative tracking information is available. Also, Susan Gary, Reporter for UPMIFA for the Uniform Law Commission, is available for questions.

Arizona: Ban on lobby gifts – HB 2137 amends the Arizona Revised Statutes to clarify “gift giving” and bans lobbyists from presenting elected officials with gifts.

Arizona: Property sales to nonprofits – HB 2219/SB 1103 provides for the sale of county property to certain nonprofit entities.

Colorado: Board governance – HB 1089 states that, unless otherwise provided in the bylaws, the board of directors of a nonprofit corporation may take action upon written notice and the board members' written vote or failure to respond. For more information, visit the Colorado Nonprofit Association’s policy page.

Colorado: Requests for information – HB 1091 allows the department of revenue to demand access to information necessary for determination of a tax liability after a good faith negotiation for the production of/access to such information.

Colorado: Charitable solicitations – HB 1109 specifies that a charitable organization, professional fund-raising consultant, or paid solicitor whose registration is suspended cannot solicit charitable contributions, provide consulting services, or conduct a solicitation. The bill also authorizes the secretary of state to investigate and set fines for violations of the charitable solicitation laws.

Idaho: Trust liability – HB 353 clarifies the definition of nonprofit organizations relating to liability circumstances and extends immunity from lawsuits to trustees of a charitable trust.

Indiana: Charity gaming – HB 1093 establishes a benefit night license in charity gaming law, authorizing qualified organizations to conduct charity gaming for the purpose of donating the proceeds to a needy individual or family.

Indiana: Nonprofit outreach – HB 1187 regulates nonprofit organizations’ means of notification and outreach regulations, including the method of delivery, based on size of membership.

Indiana: Payments in lieu of taxes – HB 1281 calls upon the department of local government finance to adopt rules for determining whether property is used for a charitable purpose; and requires payments in lieu of taxes (PILOTS) on property exempt from property tax, except for certain property used for governmental, educational, and religious purposes.

Indiana: Government donations to nonprofit community foundations – HB 1355/SB 121 allow a local government to donate money from its major moves construction fund to a charitable nonprofit community foundation; and allows such donations to be held by a charitable nonprofit community foundation as either a permanently endowed designated fund or as a non-endowed designated fund, as determined by the donor, who maintains access to non-endowed designated funds at all times.

Indiana: Donor withdrawal of funds – HB 1356 allows a donor to an institutional fund to petition a court for withdrawal of donated property from the institution if the institution is not managing or distributing the property in a manner consistent with the donor's intention.

Kentucky: Charity gaming – SB 52 extends the definition of "charitable gaming" to include electronic, computer, or other technologic aids and requires a charity, in order to operate such gaming, to be located in that county or an adjoining county. The bill also grants authority over use of charitable gaming to the Office of Charitable Gaming and sets requirements for registration and record keeping. Visit the Nonprofit Leadership Initiative’s policy page for more information.

Maryland: Charity gaming – SB 29 establishes eligibility requirements and ownership and operational guidelines for the use of slot machines by nonprofit organizations. For more information, as well as opportunities to take action, visit the policy and advocacy page of Maryland Association of Nonprofit Organizations’ website.

Maine: Charity gaming – SB 814/LD 2134 authorize low-stakes cribbage games by charitable and fraternal organizations. For more information, visit the Maine Association of Nonprofits’ policy page.

New Hampshire: Nonprofit disclosure – HB 1179 includes nonprofit organizations among the bodies subject to the state’s “right to know” law, which provides citizens with rights to access and matters of public record.

South Dakota: Sales tax exemption – SB 198 exempts from sales taxation the gross receipts received by nonprofit organizations from fees generated at shooting ranges/trap shooting facilities.

Tennessee: False information – HB 3075/SB 3666 change the penalty for a person who knowingly signs a false document concerning a nonprofit corporation for delivery to the secretary of state.

Tennessee: Sales tax exemption – SB 3637 permits nonprofit organizations, with the exception of volunteer fire departments and public schools, to conduct three fundraising events per calendar year in which goods are exempt from sales tax.

Utah: Tribal nonprofits – SB 110 modifies provisions related to nonprofit and for profit corporations, partnerships, and limited liability companies to provide for an entity created by tribal law to be treated as a foreign business entity authorized to tranaxt business in the state. 

Viginia: Tax exemptions; audits – SB 459 extends sales and use tax exemptions for qualifying nonprofit organizations and sets forth budget thresholds for audit and registration purposes as well as IRS reporting guidelines as necessary provisions to receive such exemptions. Visit the Virginia Network of Nonprofit Organizations’ policy page for more details.

Virginia: Government appropriations to nonprofits – SB 704 states that localities may appropriate public funds, personal property, real estate or donations to nonprofit organizations providing service to residents with the exception of those nonprofit organizations controlled by a church or sectarian group.

Vermont: Nonprofit health insurance – SB 221 proposes to allow employees of nonprofit organizations that receive at least 75 percent of their funding from the state of Vermont or the federal government to participate in the state employee group health insurance plan.

Vermont: Casino rights – HB 655 proposes to increase the number of casino nights that a qualified nonprofit service organization may hold from one per quarter or three per year to three per quarter or twelve per year and to increase, by the same number of occurrences, the number of nonprofit casino events that may be held at a single location quarterly or annually.

Vermont: Nonprofit employee benefit – HB 710/SB 354 seek to create a new statewide deferred compensation plan that would be available to a variety of nonprofit employers.

Washington: Property tax exemptions – HB 2675 provides for a real and personal property tax exemption for community and neighborhood organizations that use the space for the administrative office purposes of that nonprofit organization.

Wisconsin: Nonprofit service in lieu of fines – HB 684 allows individuals found guilty of certain offenses to perform community services, including for nonprofit organizations, in lieu of payments/fines.

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